GSK is a UK based pharmaceutical company that deals with different medicines, vaccines, and consumer health care products. The company invests billions in research and development for the purpose of identifying innovation and creativity in the field of pharmaceuticals. The aim of the company is to provide high quality innovative and valuable products for the pharmaceutical industry. The research and development investment of the company in 2019 was 4.3 billion GBP which resulted in the development of 39 new medicines and 15 new vaccinations to provide quality health (GSK, 2020). Porter’s five forces analysis is conducted to analyze the future of the company.
Competitive Rivalry
The competitive rivalry in the global pharmaceutical industry is high because the number of international giants relying on research and development is competing in the market. Lately, the Chinese pharmaceutical industry has emerged and it is the fastest-growing pharmaceutical industry in the world. Pfizer is the largest in 2018 with annual revenue of 53.7 billion US dollars. Roche, Johnson & Johnson, Sanofi, Merch, Novartis, Abbvie, Amgen, & GSK collected revues of 45.6, 40.7, 39.3, 39.7, 34.9, 32.8, 23.7, and 23 billion US dollar in 2018 (Ellis, 2019). The collection of revenue in billions of dollar by these companies do not only show the evidence of their financial strength but their capability of handling such massive operations. The pharmaceutical industry also has a range of local manufactures that are intensifying the competition. Therefore, the competitive rivalry in the global pharmaceutical industry is high.
Bargaining Power of Buyers
The bargaining power of buyers is high when the buyers have a range of options to choose from and the knowledge of the buyers is high regarding the product. The situation is favorable when it comes to a number of options to buy medicines and health products for the buyers but when it comes to knowledge of the products, the customers are not in advantage here. The users are completely dependant on the prescription of the doctor rather than their own knowledge (Sultana, 2016). The positive of a high number of companies is neutralized by the negative lack of knowledge in the pharmaceutical industry. Therefore, the bargaining power of buyers is high.
Bargaining Power of Suppliers
Viewing the pharmaceutical industry from the perspective of suppliers, there are many ingredients that are readily available in the pharmaceutical industry such as amoxicillin and ampicillin. On the other hand, there are some raw materials used in medicines and vaccinations by the companies are available in a scarce quantity such as active pharmaceutical ingredients. It means that in some supplies, the companies are at a dominant position while at other, the suppliers are at a dominant position (Chandna, 2020). This situation keeps a balance for bargaining power and the overall bargaining power of the suppliers for the global pharmaceutical industry is moderate.
Threat of New Entrants
Setting up the plants and the whole distribution system for the manufacturing and supply of pharmaceutical products is a capital intensive business process. The machinery, expertise, and the cost of research and development in the industry requires a high amount of capital that works as a major hurdle for the new entrants in the industry. The legal requirements and licensing in the industry is the second major hurdle as the company has to follow a whole set of instructions to operate in the pharmaceutical industry (Holland, 2014). These two major hurdles are not welcoming the new entrants in the pharmaceutical industry. Therefore, the threat of new entrants in the global pharmaceutical industry is low.
Threat of Substitutes
The threat of substitutes in the pharmaceutical industry is low as the dependence of the health care systems across the globe is high on pharmaceutical products. Even though there is the presence of herbal treatment and homeopathic but their presence is not hurting the pharmaceutical industry but this industry is continuously growing. Also, there is no innovation currently that is going to replace the need for pharmaceutical products which keep the position of this industry strong. The medicines and other health care products are the basic necessities and they are needed and they will have needed even after decades (Holland, 2014). All of these elements show that the threat of substitutes for the global pharmaceutical industry is low.
References
Chandna, H. (2020). India lists 38 drug raw materials for which it wants to end dependence on China. Available at: https://theprint.in/india/india-lists-38-drug-raw-materials-for-which-it-wants-to-end-dependence-on-china/368173/
Ellis, M (2019). Who are the top 10 pharmaceutical companies in the world? (2019).Available at: https://www.proclinical.com/blogs/2019-3/the-top-10-pharmaceutical-companies-in-the-world-2019
GSK. (2020). About us. Available at: https://www.gsk.com/en-gb/about-us/
Holland, S. (2014). The Global Pharmaceutical Industry. Manchester Business School. Available at: https://www.researchgate.net/publication/265114484
Sultana, J. (2016). Future prospects and barriers of pharmaceutical Industries in Bangladesh. Bangladesh Pharmaceutical Journal, 19(1), 53-57.